Fingers pointed in several directions on the back of plummeting new car sales

31-Oct-2018

It is worth highlighting, states Iain Robertson, that the staccato performance in new car registrations is not restricted to the UK market, as Europe has been affected negatively by market forces over the past year, even though recovery was on the cards.

As an English language student, I have always loathed made-up words, most especially when they enter common parlance, and much of my recent ire has been levelled at the debacle surrounding the UK’s political exit from the European Union, or ‘Brexit’ as some would have it. Of course, the nation’s media must shoulder much of the blame for abbreviating the two years’ worth of messiness that everyone must have known would be intensely complex to effect an extrication. After all, they formulated the ‘word’ and have fostered its broader and most hateful acceptability.

In many respects, it is inevitable that it also becomes the excuse that everyman and his dog will lean on, like the indolent local authority labourer and his shovel…although spotting the ‘unmanned shovel’ is now more popular in ‘nothing-happens-here’ Britain these days. The reality of the dramatic drop in new vehicle registrations lies in a combination of things: avaricious forward planning by motor manufacturers; political promotion of the barometric performance by carmakers; the demonisation of diesel fuel by various governments; perpetually tightened purse-strings; global trade tensions; costly changes in introducing WTLP vehicle fuel consumption and CO2 emissions ratings…oh, and bloody ‘Brexit’!

The constant ‘push-push’ by carmakers has saturated markets that simply do not possess the funds to physically buy anything anymore. A few years ago, it was considered to be a typical new car salesman’s ‘con trick’ to propose a ‘value to change’, or to discuss monthly terms, rather than outright purchase. In fact, the bottom-line for in excess of 95% of new transactions is ‘how much can you afford per month?’ and the manufacturer-underwritten (in conjunction with its funding partner) flexibility means that previously acceptable terms of 12, 24, or 36 months can now be stretched to 48 and 60 months with scarcely a bat of the eyelids. The prospect of another ‘sub-prime mortgage’ situation arising for vehicle operators, which lose the best part of 33.3% of a vehicle’s value upon registration, with a less than 20% residual at the end of the term, is a frightening one. The FCA is investigating the industry currently.

Politicians love to use the motor industry as their means of demonstrating that all is well, with their local economies. It is understandable, when appreciating the employment numbers and locations that have benefited from governmentally supported manufacturing plants. Yet, I remind you of the carmakers’ might: the day after the EU departure announcement was made, Carlos Ghosn, boss of the Nissan-Renault-Mitsubishi combine, was knocking at the door of Number 10 and a ‘secretive’ deal was struck. What its contents were remain closely guarded but it appears that, whenever something shakes at the industry’s foundations, the carmakers have their hands outstretched.

Yet, government is complicit in its dealings with the transport sector. Following more than thirty years of promoting diesel fuel as being cleaner and more economical than petrol, in the process bowing to a handful of minority groups, it commenced a ‘hate’ campaign against the fuel. However, it stepped away from the confusion and allowed the situation to fester, driving the consumer towards petrol and government’s mid-to-long-term goal of driving very expensive Electric Vehicles. Yet, scientists have stated that petrol is more ‘dangerous’ than diesel and that EVs are more polluting than diesel-powered vehicles. Despite setting-up alternative parameters, the business community has been left in a state of confusion, unable to plan for its future transport requirements, because Westminster has been tardy in announcing legislative changes in relation to vehicle taxation and business use, which the recent Budget has still not clarified and fleets remain ‘in the dark’ on the company car tax front.

The adoption of the Worldwide Harmonised Light Vehicles Test Procedure (WTLP), as a replacement for the former New European Drive Cycle (NEDC), as a ratings medium for all new motorcars, has been very slow. Research has shown that just 57% of all car variants had been tested as of the end of October, to comply with the new rules related to exhaust emissions and fuel economy expectations. This has created an order bank hiatus and a massive 343,000 (23.4%) unit sales drop across Europe in the month of September. While it was anticipated, the consumer has been bruised, battered and frustrated by its effects.

Finally, the UK’s departure from the EU has created serious concerns about future tax and duty levies on trade. A lack of clarification has factored-in a variety of scare tactics, with a vocal motor industry siding with the ‘remain’ element and adding more confusion to the market. Timid reactions by UK negotiators with the EU and a fear that a ‘no deal’ scenario might arise, presented by a Prime Minister, who was an avowed ‘remain’ candidate, despite the Right Honourable lady’s assurances that ‘she would deliver the best deal that she could for Britain’, have not provided a confident business boost.

In the meantime, several car manufacturers are sitting on expensive, unsold stocks, while others are relocating their operations elsewhere and list prices continue to escalate to cover the shortfalls. Things have seldom been so badly informed and badly managed as they have been of late and assertions that ‘we are emerging from austerity (another loathsome term)’ seem to possess a hollow ring. To be honest, I want to tell a positive story but circumstances do not allow it.

Motor Industry Snippets:

Budget does not address deeper issues

Despite the appearance of a voter-appeasing late-September Budget, the UK motorist remains a ‘tax cow’ to the government. Despite a fuel duty freeze, the cost to government has not been billions of Pounds. Opportunistic profiteering is still occurring in the fuel supply chain. The promise of more pothole repair funds will barely touch the sides of the cavities. No replacement for fuel duty has been announced, despite the arrival of ever more alternative fuel vehicles. While the government is unable to resolve the growing issues, the alternative ‘spend-spend’ reaction remains insubstantial.

Race to road may have fleet benefits

Many road car advancements used to come from motor racing, with antilock brakes, automated-manual gearboxes and traction control systems being valued outcomes. However, F1 appears to have had little relevance to the road scene in recent times, apart from (perhaps) its use of hybrid technology. However, with Volkswagen leading with its electric developments, such as the Pikes Peak victory it took earlier in 2018, and the Formula E championship attracting no less than ten major motor manufacturers in its fourth season, it is clear that the future of ‘race to road’ is anything but dead. Innovation and technology transfer are very much alive and improvements made to software and control systems for road cars is now re-emerging from the racing scene. It is a most positive story.

Dyson’s new EV is being built in Singapore

Despite Sir James Dyson’s support of the UK’s exit from the EU, the multi-millionaire vacuum cleaner manufacturer has determined that his new electric car will be produced in Singapore. His company has invested in excess of £200m at its Hullavington Airfield base, in Wiltshire, but around £2.5bn of investment has been made in the Far East. Employing over 1,100 personnel and already building 21m electric motors annually, Dyson’s plans will double the Singaporean workforce. Sadly, this decision does not show much confidence about the UK situation.

LeasePlan leader heads for USA

One of the UK’s leading car lease firms, LeasePlan, which manages almost 200,000 new cars, will lose its intuitive managing director, Matt Dyer, at the end of this year. A result of a promotion, Matt will be heading-up the LeasePlan operation in North America from January 1st, replacing Jeff Schlesinger as president and CEO of LeasePlan USA. His role in the UK, subject to FCA approval, will be assumed by Alfonso Martinez, who has been MD of LeasePlan Italy since 2012.